Major setback for planned merger between JetBlue and Spirit Airlines, a rival budget airline, as a federal judge in Boston has rejected the $3.8 billion takeover. For budget-conscious customers who depend on Spirit’s ultra-low cost strategy, Judge Leo T. Sorokin’s ruling that the merger would reduce competition and probably result in higher tickets is a clear violation of antitrust rules.
Judge Sorokin’s decision, which was announced on Tuesday, came after the Justice Department had petitioned to block the merger in September, claiming that it would “extinguish Spirit as an independent competitor” and increase expenses. If an ultra-low cost carrier were to disappear, the government said, the combined airline would “have an increased ability and incentive to raise prices.”
A crucial group, low-income leisure travelers who rely on Spirit’s rock-bottom prices, is singled out in the decision for possible harm. Judge agreed that price-conscious consumers would see “significantly reduced competition for air travel” as a result of the merger.
The court determined that JetBlue would stifle competition and acquire pricing power to charge more than its competitors if it bought Spirit, the biggest budget airline in the country. Travelers who depend on ULCCs to visit loved ones and vacation spots would be “disproportionately affected,” according to the directive.
On Tuesday, once the judge’s scolding broke, Spirit Airlines’ stock price dropped more than 50%. Without JetBlue’s size and resources, the budget carrier will have to figure out how to survive on its own.
As a little, independent airline competing against larger carriers with greater money to weather economic storms, Spirit has formidable headwinds, according to analysts. Following the brutal proxy fight with JetBlue and the failure of the previously agreed-upon Frontier merger, it may find it difficult to win back investors.
Another obstacle that JetBlue must overcome as a result of this significant court loss is the impending abandonment of its expansion aspirations in the low-cost airline market. After losing money in 2023, the carrier may decide to put more effort into enhancing operations and getting back to profitability.
In its landmark antitrust action to safeguard competition and consumers, the Justice Department canceled the deal. The Biden administration’s regulators have blocked multiple megamergers in the healthcare, publishing, and entertainment industries, among others, because they believed the combinations would drive up costs.
The court’s decision in the Spirit case, which prevents mergers in the cutthroat airline business, demonstrates this dedication.